Thursday, April 01, 2010

How to plug the $17B newspaper sales gap

This column originally was published in the March edition of Editor & Publisher Magazine and is being reprinted with permission. To subscribe to the magazine so you can see the full array of industry coverage when it first appears in print, click here.

There’s a succulent advertising stream that could replace a substantial portion of the $17 billion in sales the U.S. newspaper industry has shed since 2007. Anyone interested?

The opportunity is called Yellow Pages advertising and there are powerful reasons to believe that a growing proportion of the directory industry’s business will be up for grabs in the near future as consumers increasingly choose to let their fingers do the walking on the web.

Although newspaper publishers are in the best position to bag a substantial share of the $16.5 billion now spent annually on directory advertising, they will not be alone in the hunt. A little outfit called Google recently zeroed in on the business by starting to sell upgraded search listings to local merchants.Because newspapers have sales forces that Google can only envy, however, this opportunity is theirs to lose.

Some 85% of the Yellow Pages business, like the bulk of newspaper sales, is derived from print advertising.But there is growing evidence that the print YP business may begin to unravel as fast as a certain other print business that comes to mind.

If you are a newspaper publisher interested in diversifying away from print while building a valuable, defensible and sustainable digital revenue stream, then it’s time to think about the online directory and web-marketing business.How-to tips are coming up.First, here’s why I think the print YP business is ripe for the plucking:

About 43% of the 18 billion web searches conducted in the typical month are for products and services that consumers intend to buy from bricks-and-mortar providers, according to a study conducted by the Kelsey Group, a market research company. That comes to 7.7 billion shopping searches per month.

Kelsey also found that 53% of shoppers prefer searching the web to paging through printed directories. Young people don’t find the fat ad books to be environmentally acceptable. Older people, while also concerned about the environment, particularly hate squinting at type that seems to get smaller every year.

Taken together, the prevailing trends suggest a gloomy outlook for print directories.

Although a majority of consumers already favor online searches for products and services, most merchants keep buying YP ads because – as many of them have told me in so many words – “that’s what you are supposed to do.”The source of this wisdom usually is a YP salesperson.

Even most of the merchants who have built websites are wasting scandalous amounts of time and money on their online presence because they aren’t doing it effectively.That’s bad for them but great for astute newspaper publishers who can clue them in to the art and science of web marketing.

Web marketing matters because Google and the other search engines don’t care about the splashy graphics or clever copy that people fuss over when they build a site.The search engines only pay attention to the boring computer code you see when you click the “Page Source” tab on a web browser.

A fair number of the people who build websites – including folks at some newspapers – don’t know how to optimize the construction of a site so it gets included in the top results on Google.Poor search-engine optimization – or SEO, as the skill is called – results in an inferior position on Google. Since 95% of consumers never look past the first page of search listings, a business that doesn’t make the front page on Google is seriously out of luck.

Newspapers can take a whack at the YP piñata by becoming the unchallenged web-marketing experts in their communities. To do so, they first need to actually become experts. Then, they need to take the following steps:

Build an online business directory.Using readily acquirable business listings, create an attractive page where site visitors can search for businesses, map their locations and submit reviews of the companies.In addition to selling display advertising, sell upgrades to your free basic listings.

Offer site-building and hosting services. Working with in-house talent or widely available third-party resources, manage the construction and operation of sites for local merchants.This not only unlocks a new, recurring revenue stream but also creates a long-term collaborative relationship where you’re seen as a trusted partner, not just another money-grubbing vendor.

Provide SEO and SEM services. SEO refers to the maintenance (discussed above) that is required to assure a site readily gains high rank in a Google search. Because SEO is an ongoing process requiring regular attention, this creates another recurring revenue stream. SEM stands for Search Engine Marketing, which involves buying and monitoring the performance of keyword ads on Google and other sites.It, too, represents an ongoing revenue opportunity. You can build these capabilities in your own organization or partner with any number of outside firms.

6 Comments:

@John - Online directories are not innovative, but having a trusted partner work with your small business to make your listing effective is innovative from the point of view of the small business.

My question to Alan is what type of small business does he think would be receptive to this pitch. Where I live, I occasionally get menus from local restaurants that are dumped in the mailroom (what a crappy waste of time, money and effort). Once in a while a restaurant or other local store surprises me with a direct mail piece that has a call to action and some obvious tracking code to measure the effectiveness of their campaign.

Are you thinking that this plan would be targeted to the unsophisticated one-store business owner or would you start with small regional chains that actually have a marketing department (or someone who thinks about marketing as a core part of their job)?

Agreed that directories are a dime a dozen, haven't worked and won't work. There is one directory on the web, it's name is Google and it works well enough that no one is clamoring to switch.

Like every revenue suggestion I read for newspapers, the advice always boils down to: do a whole lot of web development work for the possibility of a little return if the product is wildly successful. For newspapers (and society) to thrive, they need to focus their efforts on journalism, not web development. And they're just not that good at it.

Google could really help newspapers by allowing them to become authorized PageRank resellers. As an advertiser, I'd much rather give money to my local newspaper than some SEO scammer with a shady backlink operation, but the backlinks are more valuable than the crappy online display ads newspapers are peddling on their websites.

Interesting post. I agree this is a huge opportunity, both from the standpoint of the advertising dollars as well as the specific issue of who will become the dominant player to replace the existing YP products.

For the latter, I find it interesting that no one has really put together a better yellow page product yet. Had hopes for Yelp, but try searching for “tree removal” in zip code 10533 and it’s useless. As much as I am “Mr. Digital”, I still find myself using printed yellow pages when I need local services like electrician, plumber, etc. The online versions are all junk (national advertisers come up on top of every search when I want a plumber in my town).

As for the bigger question of local ad $, I think this will be one of the interesting battles of the next 2-3 years. Just as it was “accidental” that department stores like Macy’s funded foreign press bureaus in the traditional newspaper market, I don’t think local directories are necessarily the best advertising vehicle for most businesses. Sure, they still make sense for the plumber or electrician, whom you only call when you have an emergency, but for many local services, they are the wrong platform.This should be where social media (hyper-local blogs, news, personal recommendations, etc) can make its play, but time will tell.

About Me

Alan D. Mutter is perhaps the only CEO in Silicon Valley who knows how to set type one letter at a time.
Mutter began his career as a newspaper columnist and editor at the Chicago Daily News and later rose to City Editor of the Chicago Sun-Times. In 1984, he became No. 2 editor of the San Francisco Chronicle.
He left the newspaper business in 1988 to join InterMedia Partners, a start-up that became one of the largest cable-TV companies in the U.S.
Mutter was the COO of InterMedia when he moved to Silicon Valley in 1996 to join the first of the three start-up companies he led as CEO.
The companies he headed were a pioneering Internet service provider and two enterprise-software companies.
Mutter now is a consultant specializing in corporate initiatives and new media ventures involving journalism and technology. He ordinarily does not write about clients or subjects that will affect their interests. In the rare event he does, this will be fully disclosed.
Mutter also is on the adjunct faculty of the Graduate School of Journalism at the University of California at Berkeley.